Fed concludes enforcement action against Citi's foreign exchange practices initiated in 2015
In 2015, Citigroup found itself at the centre of a regulatory storm when the U.S. Department of Justice (DOJ) levied criminal charges against the bank for conspiring to manipulate the price of dollars and euros exchanged in the foreign currency exchange spot market. The bank pleaded guilty to these charges and was ordered to pay a substantial penalty of $342 million.
Between 2013 and 2017, Citigroup's FX traders conspired with those at three other named banks to alter exchange rates for their own benefit. This illegal activity led to a cease-and-desist order from the Federal Reserve, which required Citigroup to devise a plan to enhance its internal controls and compliance functions, as well as to heighten its oversight of certain market activities.
As part of the order, Citigroup was also obligated to audit its existing compliance program and provide regular updates on its progress to the Fed. The bank complied with these requirements and implemented a firm-wide risk management, compliance, and audit program.
The revamp of Citigroup's data architecture and modernization of its information technology infrastructure were ongoing during this period. This overhaul, prompted by the 2020 order, aimed to manage risks across Citigroup's consolidated organisation and strengthen the bank's overall operations.
However, the specifics of the 2020 order and its impact on Citigroup's operations have not been detailed. The nature of Citigroup's ongoing enforcement orders has not been specified. What is known is that the bank is still subject to several other Fed enforcement orders, including the 2020 order.
Despite these challenges, Citigroup has made significant strides in improving its compliance and risk management practices. The new risk management program is designed to manage risks across the bank's consolidated organisation, ensuring a more secure and compliant future for Citigroup and its customers.
It is worth noting that four other banks - JPMorgan Chase, UBS, Barclays, and the Royal Bank of Scotland (now NatWest) - also pleaded guilty to similar charges. The Federal Reserve has not disclosed any new penalties against Citigroup, but the bank did not respond to a request for comment by press time.
The Fed board's statement to Reuters pertains to Citigroup's risk management program, indicating that the bank has made satisfactory progress in this area. The termination of the 2015 cease-and-desist order against Citigroup was due to the bank's involvement in a foreign currency exchange gaming scheme, marking a significant milestone in Citigroup's journey towards regulatory compliance.
